SHANGHAI, Jan 6 (Reuters) - Chinese iron ore futures dropped on Wednesday, with demand in the world's top consumer expected to weaken amid deepening output cuts by steel mills.
Chinese mills have curbed steel production and slowed purchases of steelmaking raw material iron ore due to a persistent cash crunch and weak sales.
The most active May iron ore futures contract on the Dalian Commodity Exchange DCIOcv1 was 1.6 percent lower at 317.5 yuan ($48.51) a tonne by the midday break.
"The rapid rebound that has driven spot prices to above $40 a tonne has come to an end, and the supply glut for iron ore in the medium term has not changed," said Wang Yilin, an analyst with Sinosteel Futures in Beijing.
Spot iron ore for immediate delivery to China's Tianjin port .IO62-CNI=SI tumbled 2.3 percent to $42.10 a tonne on Tuesday, posting the biggest daily drop in one month, according to The Steel Index (TSI).
The benchmark rebar futures contract for May settlement on the Shanghai Futures Exchange SRBcv1 had dipped 0.2 percent to 1,774 yuan a tonne by the midday break. Rebar and iron ore prices at 0332 GMT
Contract
Last
Change Pct Change
SHFE REBAR MAY6
1774
-4.00
-0.22
DALIAN IRON ORE DCE DCIO MAY6
317.5
-5.00
-1.55
THE STEEL INDEX 62 PCT INDEX
42.1
-1.00
-2.32
METAL BULLETIN INDEX
43.11
-1.26
-2.84
Dalian iron ore and Shanghai rebar in yuan/tonne
Index in dollars/tonne, show close for the previous trading day
($1 = 6.5453 Chinese yuan renminbi)